International Journal of Accounting Information Systems 25 (2017) 45–56

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International Journal of Accounting Information Systems

journal homepage: www.elsevier.com/locate/accinf

Factors associated with internal audit function involvement with MARK XBRL
implementation in public companies: An international study
a b c
Mohammad J. Abdolmohammadi , Steven M. DeSimone , Tien-Shih Hsieh ,
d,
Zhihong Wang
a Department of Accountancy, Bentley University, 175 Forest St. Waltham, MA 02452, USA
b Department of Accounting, University of Massachusetts Lowell, 1 University Avenue, Lowell, MA 01854, USA
c Charlton College of Business, University of Massachusetts Dartmouth, 285 Old Westport Road North Dartmouth, MA 02747, USA
d Graduate School of Management, Clark University, 950 Main Street, Worcester, MA 01610, USA

ARTICLE INFO ABSTRACT

Keywords: We examine the relationships of national legal system, company size, and corporate governance quality with
Internal auditors internal audit function (IAF) involvement with eXtensible Business Reporting Language (XBRL)
Public companies implementation in public companies. Our data source is The Institute of Internal Auditors' Global Internal
XBRL implementation, common law, civil law Audit Common Body of Knowledge (CBOK) database, from which we extract responses from 692 chief
audit executives (CAEs) for our investigation. We find evidence of differential effects of company size on
IAF involvement with XBRL implementation, depending on the national legal system. In civil law countries,
IAFs of small companies have significantly higher levels of XBRL involvement than do IAFs of large
companies, whereas, in common law countries, IAFs of large companies have higher levels of involvement
than do those of small companies. Finally, we find evidence that corporate governance quality is positively
associated with IAF involvement with XBRL implementation.

1. Introduction

Since the introduction of eXtensible Business Reporting Language (XBRL) in 1999, the adoption and implementation of this technology are
increasing globally, as it is mandated for use in financial reporting by many countries, including China (2009), India (2008), and the United
States (2009) (Trites, 2010). Efendi et al. (2016) examine the importance of XBRL disclosure and suggest that XBRL-formatted financial reports
provide investors with more incremental information than do traditional HTML filings. Nevertheless, XBRL implementation also presents
potential challenges and risks (Capozzoli and Ali, 2009; Gunn, 2007; Janvrin and No, 2012; Shin, 2003) that, to resolve, require in-depth
knowledge and understanding of the business reporting processes. Internal auditors are among the parties who possess this specialized
knowledge and, therefore, can play an important role in XBRL implementation within their companies (PricewaterhouseCoopers, 2011).

According to The Institute of Internal Auditors (IIA)'s definition of internal auditing, internal auditors may evaluate and improve risk
management and control processes related to XBRL implementation (IIA, 2016a). For example, the internal audit function (IAF) may be
involved in the evaluation of certain risks of XBRL adoption, such as incorrect tagging, inconsistencies in amounts, missing data, lack of
confidential information safeguards, and noncompliance with complex rules and deadlines. At the planning stage, internal auditors can design
controls to mitigate such risks (PricewaterhouseCoopers, 2011). Then, at the implementation stage,

Corresponding author.
E-mail address: zhihwang@clarku.edu (Z. Wang).

http://dx.doi.org/10.1016/j.accinf.2017.03.002
Received 14 July 2015; Received in revised form 23 December 2016; Accepted 29 March 2017
Available online 25 April 2017
1467-0895/ © 2017 Elsevier Inc. All rights reserved.
M.J. Abdolmohammadi et al. International Journal of Accounting Information Systems 25 (2017) 45–56

internal auditors can monitor the efficacy of controls designed to mitigate XBRL implementation risks, as well as assist with employee XBRL
skill development (PricewaterhouseCoopers, 2011). Finally, internal auditors can help to ensure the accuracy and completeness of XBRL-based
reports, especially when external auditors reluctant to provide assurance on this information due to liability concerns (Janvrin and No, 2012).
Thus, involvement in XBRL implementation provides an opportunity for internal auditors to reduce the risks of financial reporting errors and rule
and regulation violations (Pinsker, 2003; Burnett et al., 2006). To date, however, research on the factors that influence IAF involvement with
XBRL implementation is lacking. This study attempts to address this gap in the research literature by investigating the in fluence of legal systems
and company characteristics (i.e., size and corporate governance quality) on IAF involvement with XBRL implementation.

As suggested by the resource-based theory of IT business value, the macro environment generated by country characteristics, such as legal
system, interacts with firm characteristics to shape the application of IT. This, in turn, may influence how firms deploy resources to realize
competitive advantages through XBRL implementation (Melville et al., 2004). Common and civil law systems differentially influence the
financial reporting and risk management activities of public companies (cf., Hope, 2003; La Porta et al., 1998, 1999, 2000; Solomon et al., 2003).
Company size also affects corporate financial reporting and risk management issues because large companies attract a greater analyst following
that disseminates information to the public (Atiase, 1985; Bhushan, 1989) and, thus, are subject to greater investor monitoring (Doyle et al.,
2007) relative to small companies. This increased scrutiny, however, may have asymmetric effects on risk management activities across the two
types of legal systems. We predict that, due to the investor protection environment in common law countries, large companies are more likely
than small companies to deploy IAF resources to support XBRL implementation. Nevertheless, the civil law system generates weaker investor
protection and shareholder rights than does the common law system, resulting in stronger investor demand for activities that reduce information
uncertainty and enterprise risk. This is especially likely to occur for small companies due to their weaker corporate governance relative to large
companies (Choi and Wong, 2007; Choi et al., 2008). Thus, we predict that in civil law countries, small companies, as compared to large ones,
are more likely to involve their IAFs in XBRL implementation. In general, these arguments suggest an asymmetric effect of company size across
legal systems on IAF involvement in XBRL implementation.

We also investigate the relationship between corporate governance quality and IAF involvement with XBRL implementation. Empirical
evidence suggests that corporate governance quality, such as the existence of an audit committee, is positively associated with internal control
quality (Hoitash et al., 2009; Krishnan, 2005). DeSimone and Abdolmohammadi (2016) also find that better corporate governance quality leads
to increased involvement of IAFs with new activities. Thus, we expect that companies with superior corporate governance are likely to involve
their IAFs in XBRL implementation.
Using responses from 692 chief audit executives (CAEs) in the IIA's Global Internal Audit Common Body of Knowledge ( CBOK, 2010)
database, we find that the impact of company size on IAF involvement in XBRL implementation is contingent upon the national legal system. In
addition, our results support the prediction that, in common law countries, large companies are more likely to involve their IAFs with XBRL
implementation. At the same time, in civil law countries, small companies are more likely to involve their IAFs with XBRL implementation.
Results also provide marginally significant evidence that corporate governance quality is positively related to IAF involvement with XBRL
implementation.
Our study responds to Gramling et al.'s (2004) call for research to investigate organizational characteristics that influence companies' ability
to deploy resources for an IAF. We provide empirical evidence that national legal system, company size, and the quality of corporate governance
play important roles in determining how IAF resources are deployed and retained for managing an XBRL disclosure risk. The asymmetric effects
of firm size on IAFs' involvement in XBRL implementation across different legal systems also indicate the importance of considering the
interactive effects of organizational and environmental factors on IAF involvement in other risk management activities. Our research also should
be of interest to the IIA when drafting new practice advisories, as the results of our study indicate that IAF best practices for managing
technology implementation risks may be contingent on the interactive effects of firm size and legal environment.

The rest of this paper proceeds as follows. Section 2 provides the research background and hypothesis development. Section 3 presents the
research method. Section 4 contains the empirical findings, and Section 5 concludes with directions for future research.

2. Background and hypotheses

2.1. eXtensible Business Reporting Language (XBRL)

XBRL is a specification based on eXtensible Markup Language (XML) that provides companies with a tool to generate standardized and
customizable business reports and data extracts (Cohen et al., 2005). Introduced in 1999, XBRL has received much attention from regulatory
agencies worldwide for use in financial reporting by public companies. It is mandated or voluntarily adopted for financial reporting purposes in
large economies across the globe (Trites, 2010).
Research suggests that XBRL provides opportunities for companies to improve the efficiency, accuracy, and reliability of their financial
reporting (Gunn, 2007; Hodge et al., 2004; Wu and Vasarhelyi, 2004). XBRL filings also may provide incremental information to help investors
and analysts capture and analyze companies' financial information quickly and cost effectively (Efendi et al., 2016; Securities and Exchange
Commission, 2013). Blankespoor et al. (2014) find that, during the first year of mandatory XBRL adoption, information asymmetry increases due
to the steep learning curve of using XBRL. Large investors tend, at first, to benefit more from XBRL-based financial information, whereas
smaller investors need first to overcome the steep learning curve. This effect, however, tends to decrease as smaller investors gain more
knowledge about utilizing XBRL. Academic researchers also benefit from XBRL-based financial reporting as it helps correct the errors in
traditional research financial databases (Chychyla and Kogan, 2015).

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In addition, XBRL allows internal auditors to access companies' financial data in a timelier manner and reuse data across different platforms
to more effectively improve internal control quality (Pinsker, 2003). Thus, XBRL implementation benefits both internal and external information
users (Gunn, 2007; Pinsker et al., 2005; Roohani et al., 2009; Wu and Vasarhelyi, 2004). These benefits may not materialize, however, if a
company does not adopt an appropriate strategy to implement XBRL (Garbellotto, 2009a).
Garbellotto (2009a) suggests that XBRL implementation can be classified into three levels: bolt-on; built-in: at the report writer-application
level; and built-in: deeply embedded in ledgers/systems. For the “bolt-on” approach, XBRL adopters simply convert their traditional financial
reports into XBRL-based reports, using outsourcing or “bolt-on” applications (Janvrin and No, 2012). This strategy does not require additional
resources, such as internal auditors' involvement, but it may help companies only to satisfy regulatory reporting requirements. For the “built-in:
at the report writer-application level” and the “built-in: deeply embedded in ledgers/systems” levels, companies automate the XBRL reporting
processes by integrating XBRL into their reporting processes, thus providing benefits such as improving financial reporting quality and
efficiency. A “built-in” XBRL implementation method, however, likely requires more internal resources, such as IAF involvement with XBRL
implementation.

2.2. IAF and XBRL implementation

There are two main reasons that IAFs may be involved in XBRL implementation. First, as users of financial information and participants in
the corporate governance process, IAFs have a stake in the reliability of XBRL financial information and, thus, the quality of the XBRL
implementation. The technology implementation literature suggests that the experience and participation of information system users are integral
to the success of information system implementation within organizations (Sabherwal et al., 2006). Internal auditors are important internal users
of XBRL, as they perform many tasks using financial data and are familiar with business operations and the related rules and procedures of their
companies (Caplan and Kirschenheiter, 2000). Thus, they can play a key role in the success of XBRL implementation. Pinsker (2003) suggests
1
that, with the enhanced internal control environment under the “new” reporting model, IAF oversight of XBRL implementation and the use of
XBRL standardized information enables more frequent and timely updates of financial information. In turn, this allows contextual review and
collaborative use of financial information across reporting platforms. This helps IAFs better monitor reporting activities, improve the accuracy of
XBRL-based financial statement filing through oversight of the preparation process, and satisfy regulatory compliance requirements (Pinsker,
2003; PricewaterhouseCoopers, 2012; XBRL, 2009). Thus, IAFs are likely to be involved in the XBRL implementation process because they
have a stake in the reliability of XBRL information.

Second, organizational members in charge of corporate governance may assign the IAF the responsibility of managing the risks associated
with financial disclosure. Those charged with corporate governance rely on IAFs to help manage risk in many areas, including internal control
and financial reporting assurance (Cohen et al., 2004). Soh and Martinov-Bennie's (2011) study of CAEs and audit committee members from
seven large companies in Australia find that corporate management often relies on the IAF to verify internal controls and test compliance work.
Other research finds that audit committees heavily rely on IAFs to perform risk management within their organizations ( Raghunandan et al.,
2001). The results of PricewaterhouseCoopers' (2011) survey suggest that IAF involvement helps companies to monitor the risks associated with
XBRL implementation (i.e., providing inconsistent data, failing to safeguard confidential information, and failing to comply with complex rules
and deadlines). Taken together, this research implies that companies may obtain significant benefits from IAF involvement in XBRL
implementation.
To summarize, IAFs play an influential role in managing the risks associated with the adoption of new technologies. Thus, their involvement
in XBRL implementation may assist with XBRL reporting-related risk management and improve XBRL reporting quality. Based on the
resource-based theory of IT business value, Melville et al. (2004) suggest that characteristics such as firm size and the firm's macro environment
play important roles for acquiring and deploying IT resources. As background to our investigation of the potential factors that may explain the
variations in IAF practices across the world, we discuss below how company size may interact with the macro environment generated by the
country legal system to influence whether companies deploy their IAF resources for XBRL implementation.

2.3. Legal system and company size

The two basic forms of legal systems are common law and civil law. Per the Black's Law Dictionary (2016), common law, of British origin,
is a system in which rules are formed by the courts over time to resolve specific disputes; and civil law (also known as code law), of Roman
origin, is a legal system in which rules are formed as rules of conduct intimately linked to ideas of justice and morality. Countries with common
law systems generally have stronger corporate governance, greater economic development, and superior investor protection than do civil law
countries (La Porta et al., 1998, 1999, 2000; Solomon et al., 2003).
Due to the increased levels of financial disclosure designed to protect investors, companies that operate in common law countries are
expected to allocate significant resources to governance activities, such as enforcement of ethics codes and maintenance of e ffective internal
control over financial reporting (Engel et al., 2007). Companies that operate in common law countries also may use different levels of resources
to deploy IAFs, depending on their size. Resource-based theory suggests that firm-specific characteristics, such as company size, play an
important role in the deployment of IAF resources for XBRL implementation to generate competitive advantage ( Melville et al., 2004). Large
companies are more likely to have a formal IAF. They also allocate greater resources to

1 According to Pinsker (2003), the new reporting model emphasizes online real-time reporting in the contemporary business reporting environment.

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support the IAF for more advanced tasks, relative to small companies (e.g., Arena and Azzone, 2007). Larger companies also attract a greater
analyst following (Bhushan, 1989) and have more information available to the public (Atiase, 1985). Thus, they are subject to higher levels of
monitoring relative to smaller companies in common law countries. In addition, large companies in common law countries tend to have
relatively higher internal audit budgets than do smaller companies (Anderson et al., 2012; Carcello et al., 2005; IIA, 2016b). This allows larger
companies to deploy their IAFs for more advanced activities, such as XBRL implementation. Thus, in common law countries, large companies,
as compared to small ones, are more likely to allocate resources to involve their IAFs in the XBRL implementation process, leading to the
following hypothesis:

H1a. Large companies that operate in common law countries will have a higher level of IAF involvement with XBRL implementation than will
small companies.
In contrast, investors in civil law countries where investor protection is weaker may demand higher quality disclosure to compensate for
higher investment risk relative to common law countries (Choi and Wong, 2007; Choi et al., 2008). Therefore, companies in civil law countries
face a higher demand for enhanced risk-control mechanisms to compensate for higher investment risk (Choi and Wong, 2007; Choi et al., 2008).
Studies of IAFs in countries with civil law legal systems (e.g., Belgium, Italy) suggest that the role played by internal auditors is changing from
traditional internal control work to advanced risk management, especially when compared with common law countries (e.g., United States)
(Allegrini et al., 2006; Sarens and de Beelde, 2006a, 2006b; Soh and Martinov-Bennie, 2011). With the roles of IAFs changing from compliance
work to risk management and consulting in civil law countries, IAFs may become involved in XBRL implementation to alleviate investor
concerns about XBRL reporting risk.
Company size may asymmetrically influence IAF practices in civil, relative to common law countries. Doyle et al. (2007) suggest that small
companies tend to have more weaknesses in their internal control systems, thus presenting a higher level of risks to investors. Bhushan (1989)
reports that small companies tend to have a smaller analyst following relative to large companies and, thus, may encounter greater information
asymmetry problems because fewer analysts help to disseminate financial information. Thus, small companies face increased investor demand
for information and risk management in civil law countries. Therefore, small companies may face a greater demand to deploy their IAF
resources for XBRL implementation relative to large companies in the civil law legal environment. This leads to the following hypothesis:

H1b. Small companies that operate in civil law countries will have a higher level of IAF involvement with XBRL implementation than will large
companies.
Fig. 1 presents our expectations per H1a and H1b.

2.4. Corporate governance

Studies which examine the relationship between corporate governance and the IAF suggest that stronger corporate governance is associated
with increased interaction between the audit committee and the IAF (Raghunandan et al., 2001). Corporate governance quality is also positively
associated with an increased involvement of IAFs in new activities (DeSimone and Abdolmohammadi, 2016) and in the financial reporting
process (Abbott et al., 2010). Gramling et al.'s (2004) review of the literature on the relationships between IAFs and other parties responsible for
corporate governance suggests that IAFs serve as a resource to support the external auditor, the audit committee, and management in meeting
new regulatory requirements, thus promoting high-quality corporate governance. Thus, we posit that companies with higher corporate
governance quality are more likely to involve their IAFs with XBRL implementation than do those with lower corporate governance quality,
leading to our final hypothesis:

H2. Corporate governance quality is positively related to IAF involvement with XBRL implementation in public companies.

Fig. 1. Expected effects of legal systems and firm size on IAF involvement in XBRL implementation.

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3. Research method

3.1. Sample

The IIA's CBOK (2010) database is the data source for this study. CBOK was developed by the IIA Research Foundation based on a 2010
worldwide survey of IIA's global membership. The IIA surveyed 13,582 internal auditors, including CAEs from 107 countries, regarding various
2
internal audit issues, such as budgeting, information technology risk, and key skills for internal auditors. Three filters are used to derive a subset
of this database as our useable sample. First, the sample is limited to CAEs because these high-ranking professionals are arguably the most
3
knowledgeable about their IAFs' involvement with XBRL implementation. This reduces the sample from 13,582 to 3217. Second, the sample is
limited to publicly-traded (listed) companies. This filter reduces the sample of 3217 to 1102 CAEs. Finally, the sample is limited to countries
with at least 10 CAE observations.
As shown in Table 1, the final sample consists of 692 observations that include eight countries with civil law systems (n = 332) and four
countries with common law systems (n = 360). Thus, the sample is relatively balanced between the two legal systems. Table 1 also provides the
status of XBRL reporting requirements for the countries in our sample. This information is obtained from Pasmooij (2010), Watson and Dhobale
(2009), and XBRL.org.

3.2. Empirical model

The dependent variable in our empirical model is IAF involvement with XBRL implementation. We utilize CAE responses to one question
from the CBOK database, “Please indicate whether your internal audit activity performs (or is anticipated to perform) Implementation of
Extensible Business Reporting Language (XBRL)” and create a binary variable (1 for Yes and 0 for No).
Three independent variables (legal system, company size, and corporate governance quality) are used in this study. Legal system
(LegalSystem) is classified as civil law system (coded as 0) versus common law system (coded as 1). Company size is measured by full-time-
equivalent employees (FTE). CBOK (2010) provides three different measures of size: FTE, total assets, and total revenues. As expected, these
proxies of size are highly correlated (bivariate correlation coefficients range from 0.560 to 0.792). FTE is used because it is free from currency
translation, is generic in nature, and has been used in prior research ( DeSimone and Abdolmohammadi, 2016). Moreover, the IIA (2016b) also
uses FTE as a proxy for company size in its reports. Companies that have > 1000 FTEs are classified as large companies and those that have
1000 or less FTEs are classified as small companies. The cutoff point of 1000 FTEs results in 192 small companies and 500 large companies.

Finally, we follow DeSimone and Abdolmohammadi (2016) and generate a variable to proxy for corporate governance quality
(CorpGovQual) by aggregating seven items provided by CBOK (2010). These items are internal documentation, including board committee
charter, corporate governance code, code of ethics, strategic plan, audit committee charters, reporting line of the IAF to the audit committee, and
the audit committee's involvement with the IAF. Appendix A presents the details of the seven items. CorpGovQual takes a range of 0 (no
documented corporate governance items) to 7 (all of the corporate governance factors are present).

3.3. Control variables

IAF age (IAFage). Prior research suggests that an IAF's age is an indicator of its size, maturity, and capability (Sarens et al., 2011), as well as its
involvement in advanced auditing activities (Sarens and Abdolmohammadi, 2011; DeSimone and Abdolmohammadi, 2016). Thus, we control for
4
IAF age and expect a positive association between IAF age and its involvement in XBRL implementation. CAE gender (CAEgender) is
included as a control variable because the literature suggests that gender differences significantly influence the adoption and sustained usage of
new technologies (Venkatesh et al., 2000; Venkatesh and Morris, 2000). This line of research finds that men's use of technology is driven by their
perception of its usefulness, while women's is influenced by their
perceived ease of use. Thus, we control for CAE gender but do not make a directional prediction.
CAE competence attributes. Following Abdolmohammadi and Boss (2010) and DeSimone and Abdolmohammadi (2016), CAE competence
attributes (education, major, certification, and training) are used as control variables. Overall, we expect that IAFs of companies with more
competent CAEs are more likely to engage in XBRL implementation than are those with less competent CAEs. More detail about each CAE
competence attribute is presented below.
CAE education (CAEeducation). The educational level (graduate versus undergraduate) of the CAE is used as a control variable, as more
educated workers are more likely to adopt new technologies, such as XBRL (Chun, 2003). Thus, we expect a positive relationship between CAE
education and our dependent variable.
CAE major (CAEmajor) is used as an indicator of CAEs' background in accounting. Given the accounting nature of XBRL reporting, we
expect that CAEs with an accounting major are likely to support XBRL reporting and, thus, are more likely to involve their IAFs in

2 More detailed information about the CBOK (2010) database can be found at the CBOK resource center at https://na.theiia.org/iiarf/Pages/Common-Body-of-Knowledge-
CBOK.aspx (Accessed November 12, 2015).
3 Including managers (and/or seniors and staff) in the sample poses a problem of double counting if these professionals are from the same companies. There is no way to
correct for this in CBOK (2010), as CBOK does not identify companies in its data set.
4 CBOK (2010) does not have data on IAF size, only on IAF age. Nevertheless, we incorporate company size in our model as an independent measure, as there is evidence that
overall company size and IAF size are highly correlated (Carcello et al., 2005).

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Table 1
Countries in sample and their legal system and XBRL adoption status (N = 692).

Country Civil law Common law Total XBRL reporting requirement

Australia 20 20 Voluntary from July 2010

France 29 29 Voluntary from 2010
Germany 44 44 Voluntary from Jan 2007
India 17 17 Mandatory from Oct 2008
Italy 35 35 Mandatory from Feb 2009
Japan 86 86 Mandatory from Apr 2008
Netherlands 12 12 Voluntary from Jan 2007
Spain 19 19 Mandatory from Feb 2009
Sweden 10 10 Voluntary from June 2007
Taiwan 97 97 Mandatory from 2010
United Kingdom 33 33 Voluntary from 2007; Mandatory from 2011
United States 290 290 Accelerated filers Dec. 15, 2008;
others by Dec. 15, 2010
Total 332 360 692

XBRL implementation.
CAE-certified internal auditor (CAEcia) and CAE-certified public accountant (CAEcpa) are adopted as indicators of CAE competence. When
CAEs are certified to possess internal auditing and accounting knowledge, they are likely to understand the importance of the role played by the
IAF and provide more support for XBRL implementation. Thus, we expect CAEcia and CAEcpa to be positively related to IAF involvement
with XBRL implementation.
CAE's continuing professional education (CAEcpe) is also utilized to proxy for CAE competence. The IIA has a requirement of 40 hrs of
CPE per year (IIA, 2012). We expect CAEs who complete CPE to possess more updated accounting knowledge and, thus, be more likely to
support IAFs' involvement in XBRL implementation than will those without CPE. CAEcpe is coded as 1 if the CAE has had 40 hrs of CPE per
year and 0 otherwise.
Industry. Research that examines voluntary XBRL adoption finds higher rates of adoption in financial services and business services
5
industries than in other industries (Efendi et al., 2011). Therefore, industry is used as an indicator variable, whereby financial services (coded as
1) are compared with other industries (coded as 0). We expect a positive relationship between Industry and IAF involvement in XBRL
implementation.
Overall, we estimate the following logistic regression to test our hypotheses:
XBRLimplement ∗ + IAFage + CAEgender
= α + LegalSystem + CompanySize + CompanySize LegalSystem + CorpGovQual
it

+ CAEeducation + CAEmajor + CAEcia + CAEcpa + CAEcpe + Industry + εit (Model 1)

All test and control variables in Model 1 are defined in Table 2.

4. Results

4.1. Descriptive statistics and univariate tests

Table 3 presents descriptive statistics for all variables. Overall, 9.4% of respondents indicate that their companies' IAFs are involved with
XBRL implementation (see the top row). We also compare the mean values of independent variables between companies that involve the IAF in
XBRL implementation and companies that do not. The results, as presented in Table 3, indicate that 9.0% of the CAE responses in civil law
2
countries are involved with XBRL implementation, compared with 9.7% in common law countries. These levels of involvement do not differ (χ
= 0.98, p = 0.795). In addition, 15.1% of small companies involve their IAFs in XBRL implementation, which is significantly different from
2
7.2% of large companies (χ = 10.18, p = 0.002). Further, companies with stronger corporate governance quality (CorpGovQual) have
significantly higher IAF involvement with XBRL implementation (t = 1.94, p = 0.053), relative to companies with lower corporate governance
quality.
For the control variables, IAFage does not influence IAF involvement in XBRL implementation. For the next three variables (CAEgender,
CAEeducation, and CAEmajor), the results are significant: IAFs with female CAEs and those led by CAEs with graduate degrees are more
involved with XBRL implementation, as are those led by CAEs whose major is accounting. There is no signi ficant difference, however, in terms
of IAF involvement in XBRL implementation for CAE professional certification (CAEcia, CAEcpa), continuing professional education
(CAEcpe), or industry (Industry).

5 We consider the CBOK (2010) classifications of banking and financial institutions/credit unions/thrift and savings and loan, and security and commodity services/ holding
companies as financial services.

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Table 2

Variables definitions.

Variables CBOK (2010) question Definition

Dependent variable
XBRLimplement Q63_A_49 1 if internal auditors are involved in XBRL implementation, 0 otherwise
Independent variables
LegalSystem Q2 1 if common law system, 0 if civil law system
CompanySize Q18 1 if FTE is > 1000, 0 otherwise
CorpGovQual Q22_1 to 5, Q14,Q29 Linear additive measure of corporate governance quality and IAF guidance items within organization as
well as IAF reporting line and CAE involvement with audit committee
Control variables
IAFage Q6_Unans_missing_AllCategories Age of IAF (eight hierarchical categories)
CAEgender Q5_NoZero 1 if male, 0 if female
CAEeducation Q7_NoZero_Grad_Undergrad 1 if graduate degree, 0 otherwise
CAEmajor Q8_3 1 if the CAE graduated with an accounting major, 0 otherwise
CAEcia Q11_A_1AND9 1 if the CAE is a Certified Internal Auditor (CIA or equivalent), 0 otherwise
CAEcpa Q11_A_19 1 if the CAE is a Certified Public Accountant (CPA or equivalent), 0 otherwise
CAEcpe Q15_NoZero 1 if the CAE receives at least 40 hrs of CPE per year, 0 otherwise
Industry Q17 1 if financial services, 0 otherwise

Table 3
Descriptive statistics DV: implementation of eXtensible Business Reporting Language (XBRL) (yes/no) (N = 692, lower if there is missing data).

Is the IAF involved with XBRL implementation? No Yes Statistic a

Sig.
627 (90.6%) 65 (9.4%)

LegalSystem Civil law 302 (91.9%) 30 (9.0%) 2 0.795

χ = 0.98
Common law 325 (90.3%) 35 (9.7%) 2
χ = 10.18
CompanySize Small (1000 FTE or less) 163 (84.9%) 29 (15.1%) 0.002
Large (1001 FTE or more) 464 (92.8%) 36 (7.2%)
2
CorpGovQual Mean (Std. Dev.) (scale 0–7) 5.23 (1.30) 5.65 (1.41) χ = 1.94 0.053
IAFage 0–2 years 33 (97.1%) 1 (2.9%) 2 0.616
χ = 5.36
3–4 years 70 (90.9%) 7 (9.1%)
5–6 years 99 (86.8%) 15 (13.2%)
7–10 years 140 (91.5%) 13 (8.5%)
11–25 years 179 (91.3%) 17 (8.7%)
26–50 years 72 (87.8%) 10 (12.2%)
51–100 years 28 (93.9%) 2 (6.7%)
101 years or more 5 (100%) 0 (0%)
Total 626 (90.6%) 65 (9.4%) 2
χ = 10.65
CAEgender Male 472 (92.9%) 36 (7.1%) 0.002
Female 149 (84.7%) 27 (15.3%) 2
χ = 4.42
CAEeducation Graduate 287 (93.2%) 21 (6.8%) 0.037
Undergraduate 338 (88.5%) 44 (11.5%) 2
χ = 13.17
CAEmajor Accounting 335 (87.0%) 50 (13.0%) < 0.001
Other 292 (95.1%) 15 (4.9%) 2
χ = 0.82
CAEcia Yes 253 (89.4%) 30 (10.6%) 0.427
No 374 (91.4%) 35 (8.6%) 2
χ = 1.24
CAEcpa Yes 217 (88.9%) 27 (11.1%) 0.277
No 410 (91.5%) 38 (8.5%) 2
χ = 0.00
CAEcpe Yes 483 (90.6%) 50 (9.4%) 1.000
No 144 (90.6%) 15 (9.4%) 2
χ = 0.03
Industry Financial 131 (91.0%) 13 (9.0%) 0.507
Other 495 (90.5%) 52 (9.5%)

See Table 2 for variable definitions.

a Sig. is two-tailed significance level for each variable. Significant results at conventional levels are highlighted.

4.2. Univariate tests of size effect by legal system

H1a predicts a higher level of IAF involvement in XBRL implementation of large companies in common law countries relative to small
companies in common law countries. As shown in Table 4 and Fig. 2, 10.7% of large companies in common law countries involve their IAFs in
2
XBRL implementation, which is marginally greater than the 5.7% involvement of IAFs in small companies in common law countries ( χ = 1.59,
p = 0.075, one-tailed), which is consistent with H1a. Consistent with H1b, 20.5% of small companies in civil law countries involve their IAFs in
2
XBRL implementation, which is significantly higher than the 2.4% of large companies in civil law countries (χ = 30.79, p < 0.001).

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M.J. Abdolmohammadi et al. International Journal of Accounting Information Systems 25 (2017) 45–56

Table 4
Public company size by legal system dependent variable: proportion of IAF involvement in XBRL implementation (N = 692).

Frequency and proportion of XBRL implementation

(1) Company size (2) Common law (3) Civil law (4) Total
a 4 (5.7%) 25 (20.5%) 29 (15.1%)
Small
b 31 (10.7%) 5 (2.4%) 36 (7.2%)
Large
Total 35 (9.7%) 30 (9.0%) 65 (9.4%)
χ2 1.59 30.79
p-value < 0.075 (H1a, one-tailed) 0.001 (H1b, one-tailed)

a 1000 or less full time equivalent employees (FTE).

b > 1000 full time equivalent employees (FTE).

4.3. Multivariate tests of hypotheses

Pearson correlation matrix. Table 5 presents a bivariate correlation matrix of the dependent and independent variables. To avoid
multicollinearity, these coefficients should be < 0.50. Only the coefficient between LegalSystem and CAEcpa (0.54) is > 0.50. CAEcpa is also
highly correlated with CAEmajor (correlation coefficient = 0.42). For this reason, we drop CAEcpa from our Logit Model 1.
Logit Model. Table 6 presents the estimated logistic regression model. The model is significant at the p < 0.001 level, with 92.7%
2
classification accuracy and 15.4% Nagelkerke pseudo-R . Consistent with the univariate results, LegalSystem is not significant (B = −0.948, p =
0.141) but CompanySize is significant (B = −2.544, p = 0.017). In support of H1a and H1b, the interaction between LegalSystem and
CompanySize (H1a and H1b) is highly significant and positive (B = 3.234, p = 0.008), suggesting that the impact of company size on IAF
involvement with XBRL is contingent upon the legal system. We also perform additional tests, as presented in the next Section (4.4), to analyze
the interaction effect between company size and national legal systems in detail.
In support of H2, the results also indicate that corporate governance quality (CorpGovQual) is marginally associated with IAF involvement
with XBRL implementation in public companies (B = 0.251, p = 0.065, one-tailed). Among the control variables, only CAEmajor is significant
(B = 1.611, p = 0.003, one-tailed). This result suggests that IAFs led by CAEs with an accounting major have a higher likelihood of involvement
with XBRL implementation than do those without an accounting major. None of the remaining control variables (IAFage, CAEgender,
CAEeducation, CAEcia, CAEcpe, or Industry) is statistically significant.

4.4. Additional analysis

To further test the asymmetric effects of size across legal systems (H1a and H1b), we re-estimated Model 1 separately for common law
countries and civil law countries. For common law countries, the model (untabulated) is significant (p = 0.011), with 12.7% Nagelkerke pseudo-
2
R and 90% classification accuracy. Company size is marginally significant (p = 0.100, one-tailed; B = 0.807). Corporate governance is
significant at (p = 0.008, one-tailed; B = 0.499). CAEs' accounting major is also signi ficantly and positively associated with IAF's involvement
with XBRL implementation (p = 0.005, one-tailed; B = 1.993).
2
For civil law countries, the model is significant (p = 0.048) with 46.9% Nagelkerke pseudo-R and 97.3% classification accuracy. The
company size effect is marginally significant (p = 0.060, one-tailed) and negative (B = −2.846), and the corporate governance effect is significant
(p = 0.050, one-tailed) and negative (B = −0.886). In addition, CAEs' accounting major is not significant in this model, but CAEcpe is significant
(p = 0.042, one-tailed; B = −3.406). These results lend further support for the asymmetric effects of size across legal systems. Additional analysis
suggests an asymmetric effect of corporate governance quality across legal systems, which may explain why the corporate governance e ffect is
only marginally significant in the main analysis using the full sample.

Fig. 2. Effects of legal systems and firm size on IAF involvement in XBRL implementation.

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M.J. Abdolmohammadi et al. International Journal of Accounting Information Systems 25 (2017) 45–56
Table 5

Pearson correlation matrix.

1 2 3 4 5 6 7 8 9 10 11 12

1. XBRLimplement 1.00
2. LegalSystem 0.01 1.00
a a
3. CompanySize −0.12 0.19 1.00
b a
4. CorpGovQual 0.08 0.29 −0.02 1.00
a
5. IAFage 0.01 −0.05 0.16 0.08 1.00
a a a
6. CAEgender −0.13 −0.06 0.15 0.07 0.12 1.00
b b a
7. CAEeducation −0.08 0.08 0.12 0.02 −0.01 0.06 1.00
8. CAEmajor a a a b 0.04 a 0.01 1.00
0.14 0.37 0.13 0.09 −0.11
9. CAEcia 0.03 0.05 −0.04 −0.01 −0.03 −0.07 0.02 0.02 1.00
a a a a
10. CAEcpa 0.04 0.54 0.21 0.13 0.05 0.01 0.03 0.42 −0.07 1.00
a b a a a a
11. CAEcpe 0.01 0.37 0.09 0.20 0.04 −0.02 0.06 0.18 0.20 0.21 1.00
12 Industry −0.01 0.15
a
−0.18
a
0.11
b
0.16
a −0.05 0.05 −0.04 −0.07 0.02 0.15 1.00

See Table 2 for variable definitions.

a Significant at the 0.05 level (two-tailed).
b Significant at the 0.01 level (two-tailed).

Table 6
Binary logistic regression dependent variable: involvement with XBRL implementation (as of 2010, N = 692).

Variable Expected sign B Wald Sig.

LegalSystem − −0.948 1.158 0.141
a
a
CompanySize − −2.544 4.552 0.017
a
LegalSystem ∗ CompanySize (H1a and H1b) + 3.234 5.898 0.008
a
CorpGovQual (H2) + 0.251 2.299 0.065
IAFage + 0.054 0.202 a
0.327
CAEgender ? −0.433 1.211 0.271
CAEeducation ? −0.085 0.058 0.810
a
CAEmajor + 1.611 7.913 0.003
a
CAEcia + 0.212 0.348 0.278
a
CAEcpe + −0.440 0.497 0.245
Industry + 0.300 0.476 a
0.245
Constant ? −4.238 13.419 < 0.001
Chi-square (significance) 33.735 (< 0.001)
Classification accuracy 92.7%
2 15.4%
Nagelkerke pseudo R

See Table 2 for variables definitions.

a Sig. is one-tailed significance for directional variables, two-tailed for others. Significant results are highlighted in the last column.

5. Summary and conclusions

Using responses from 692 CAEs of public companies in the CBOK (2010) database, we find significant asymmetric effects of company size
across legal system on IAF involvement with XBRL implementation. These results are consistent with our expectation that small companies are
more likely to involve their IAFs with XBRL implementation in civil law countries, and large companies are more likely to do so in common law
countries. We also find corporate governance quality to be marginally associated with IAF involvement with XBRL implementation in public
companies. Additional analysis indicates that the positive marginal association between corporate governance quality and IAF involvement with
XBRL implementation appears to be driven by results related to common law countries.

The results of this study enhance our understanding of the factors that influence companies' decisions to engage their IAFs in technology
(e.g., XBRL) implementation. It therefore contributes to the accounting literature by demonstrating the role of the IAF in managing XBRL
disclosure risks in different legal environments. Our findings also have implications for the impact of company size on IAFs' involvement in
6
other types of risk management activities across the common law and civil law legal systems. For example, in common law countries, large
companies may have higher demand for assurance on their voluntary sustainability reports in order to reduce disclosure risk, relative to small
7
companies. Thus, they may be more likely to involve their IAFs in sustainability assurance. On the other hand, small companies in civil law
countries may utilize the IAF as a tool to manage their sustainability disclosure risk while they attempt to satisfy higher demand for
sustainability disclosure.
The results of our study should be of interest to practitioners, regulators, and accounting researchers. First, our findings may help

6 Ernst and Young (2013) identify various risk management activities (e.g., sustainability disclosure risks management, information security risk management, and social media
risk management) where IAF involvement may make significant impacts.
7 For example, Trotman and Trotman (2015) describe the IAF's involvement in greenhouse gas/energy reporting at large companies in a civil law country.

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M.J. Abdolmohammadi et al. International Journal of Accounting Information Systems 25 (2017) 45–56

internal auditors and audit committees to understand and evaluate current internal audit practices regarding XBRL implementation. Second, the
results of our study may help IIA members and staff to understand the differing use of IAFs in XBRL implementation across common and civil
law legal systems. Thus, we potentially contribute to the IIA's ongoing development of new IAF global best practices guidance.

Finally, our results may help global XBRL service providers and software vendors, such as Bowne, Merrill, SAP, IBM Cognos, and Oracle
(see Enrst and Young, 2010 for a list of XBRL service providers and software vendors), effectively promote XBRL-related solutions to
companies across the world. For example, XBRL service providers and software vendors may focus more on promoting advanced built-in
solutions (Garbellotto, 2009a), that require a great amount of internal support for XBRL implementation, to large companies in common law
countries and small companies in civil law countries. This is because these companies are more likely to expend resources such as the IAF for
XBRL implementation to mitigate risk. Although adopting a more advanced XBRL solution may incur additional costs, Garbellotto (2009b,
2009c) argues that the benefits may outweigh the additional costs of such solutions. This is because advanced built-in solutions may signi ficantly
reduce XBRL reporting time and filing costs. They also provide better overall control over XBRL accuracy than less advanced solutions.

Like many survey-based studies, our study is subject to several limitations. First, the CBOK (2010) survey was conducted in 2010, when
many companies in our sample were still in the early stages of XBRL adoption. Companies may have focused primarily on XBRL compliance to
satisfy the basic regulatory requirement of providing timely XBRL filings required by the SEC, instead of deeply integrating XBRL into their
financial reporting systems through IAF involvement. This may explain why the IAF involvement rate in our study is low (9.4%). Second, the
CBOK (2010) database does not provide detailed information about the levels of XBRL implementation (e.g., bolt-on versus built-in), which
may be an important factor since more advanced-level XBRL implementation requires more internal resources (e.g., IAF) to support the process.

Future studies may benefit from extending this research to an examination of how companies may e ffectively manage their XBRL
implementation risks when IAF is not involved. For example, future studies could investigate whether XBRL service providers may help
effectively integrate XBRL into companies' financial reporting systems. Finally, in-depth study of how IAFs are involved in XBRL
implementation at various stages of XBRL reporting may also be a fruitful avenue for future research. For example, at early stages of XBRL
implementation, IAFs may focus more on their risk management function by identifying risks and designing control mechanisms such as
reducing financial item tagging errors; at later stages, IAFs may focus more on their assurance function by validating XBRL-based filings.

Data availability

Contact the Institute of Internal Auditors Research Foundation.

Acknowledgement

The Institute of Internal Auditors Research Foundation (IIARF) generously granted access to its Common Body of Knowledge in Internal
Auditing (CBOK, 2010) database for this study, for which we are grateful. We thank Stewart Leech (editor), William Dilla (associate editor), and
the two anonymous referees for their valuable suggestions. A special thanks to Dr. Dilla who provided very detailed comments and suggestions
during the review process. These comments helped us improve the paper significantly for which we are grateful. The paper has also benefitted
from comments during presentations at Bentley University, especially from Jean Bedard, Jace Garret, Rani Hoitash and Jay Thibodeau.

Appendix A. Corporate governance variable definition

The corporate governance quality (CorpGovQual) variable is a linear additive variable based on answers to the following CBOK (2010)
questions.
“Which of the following exist in your organization? (please mark all that apply)” and lists 12 items for CAEs to select. The following five
items represent companies' internal documentation for corporate governance (We code each as 1 if present and 0 if not present).

1. Board/supervisory committee charter

2. Corporate governance code
3. Corporate ethics policy/code of ethics/code of conduct
4. Long-term strategic plan for the organization
5. Audit committee charter

“Where do you administratively report (direct line) in your organization?” We code as 1 if the CAE reports directly to the Audit Committee
or equivalent, 0 otherwise.
Audit Committee or equivalent
General/Legal Counsel
Chief Executive Officer (CEO)/president/head of government agency Chief
financial officer (CFO)/vice president of finance

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M.J. Abdolmohammadi et al. International Journal of Accounting Information Systems 25 (2017) 45–56

Chief operating officer (COO)

Chief risk officer (CRO), or equivalent
Controller/financial director
Other
“Do you meet or talk with the audit committee/chairman in addition to regularly scheduled meetings?” (We code as 1 for yes, 0 for no).

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